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Steel Market Clouded by Surplus

Sponge iron production surpassed expectations at 216,000 tons during the first quarter of the current Iranian year (March 21-June 21), creating a surplus of more than 10,000 tons in the domestic market.

The surplus production and absence of export markets have led to sponge iron being sold in the domestic markets at $20-$30 below the global price for scrap iron, said Asadollah Farshad, the managing director of Ghadir Iron and Steel Company, Foolad News reported.

He predicted a tough year ahead for domestic steel manufacturers, noting that they have been unable to export any of their products during the current year’s first quarter due to the decline in global steel prices.

“This is while during a similar period last year, more than 50,000 tons of steel products were exported to the Persian Gulf countries,” he said.

Farshad hoped that steel exports would pick up during the second half of the current Iranian year provided the government revives its infrastructural development projects.

Low Demand for Steel Sheets

The domestic steel industry has been hit hard by an unprecedented downturn in construction activities and declining global prices.

So much so that even steel sheets, used for manufacturing a wide range of industrial products, are facing diminished demand.

Meanwhile, as domestic manufacturers are struggling to sell the piled up steel sheets in their storehouses, official data by Iran Customs Administration indicate a surge in import of steel sheets last Iranian year.

Import of hot-rolled sheets increased by 29% compared with the previous year, while 144% more cold-rolled sheets were imported during the period.

Although last year, the administration increased import tariff on flat steel products from 4% to 15%, the huge amount of imports were reportedly registered before the new tariffs were enacted.

It appears that a number of traders deliberately registered huge import orders prior to the imposition of the new import tariff to hoard the steel sheets, resulting in lower demand for domestic products.